Tata AIA, HDFC, Max Life and ICICI Pru ahead of LIC in settling individual death claims

LIC India can no longer boast of a healthy claim settlement ratio as its unique selling proposition (USP).

For years, LIC continued to maintain top spot in terms of individual death claim settlement ratio. However, last fiscal, private insurers Tata AIA, HDFC Life, Max Life and ICICI Prudential have overtaken LIC India in settling individual death claims.

In 2017-18, Max Life overtook LIC India in terms of individual death claim settlement ratio for the first time.

Tata AIA topped the list by settling 99.07% of claims received last fiscal. HDFC Life closely followed Tata AIA with claim a settlement ratio of 99.04%.

Similarly, Max Life and ICICI Prudential were marginally ahead of LIC with claim settlement ratio of 98.74% and 98.58% last fiscal. LIC recorded a claim settlement ratio of 97.79% in terms of individual death claim ratio.

Experts attribute this to better underwriting practices of private players. Gurpal Singh Dhingra of Prudent Insurance Brokers said most private insurers have got better at covering risks. They usually do not cover high-risk policies. Another factor that has contributed to the better claim settlement ratio of private players is low volume compared to LIC India. Higher the volume, higher the chances of repudiation, he added.

A senior official of a private insurer told Cafemutual that most insurers have put in place systems and processes to reduce instances of frauds.

Overall, private insurers death claim settlement ratio stood at 96.64% in individual policies. There has been a 1% increase in individual death claim settlement ratio of private insurance companies in FY 18-19 compared to the previous fiscal. However, LIC saw a marginal decline in its number from 98.31% in FY 16-17 and 98.04% in FY 2017-18 to 97.79% in FY 2018-19.

Claim settlement ratio is the number of claims settled to the total number of claims registered in a financial year. There are two types of claims – claims arising out of death i.e. death claims and claims settlement on maturity of policies like endowment policies, ULIPs etc. Typically, policyholders don’t face any problem with regard to claim settlement for the latter. In case of claims arising out of death, death claim settlement record of the company indicates the likelihood of an insurer to make good the losses.

In its annual report, IRDAI stated that life insurance companies had settled a total of 8.43 lakh claims on individual policies, amounting to Rs.17365 crore during the fiscal. The companies also repudiated 6372 claims totalling Rs. 539 crore.

In group policies, the industry received 8.70 lakh claims of which the insurers settled close to 8.62 lakh claims or 99.13% claims last financial year.

Claim settlement ratio FY 2018-19

Claim settlement duration

In terms of the duration of settlement of claims arising out of death, private insurance companies were significantly faster than LIC.  The IRDAI annual report shows that private insurers settled 59.73% of individual claims in less than three months as compared to 46.78% by LIC last fiscal. In the six-month period though, LIC overtook the private players by settling 36.03% of the total claims. Such a percentage was 18.58% for private insurers.

Overall, the insurance industry has settled close to 49.66% individual death claims in less than three months and 32.15% of the claims in 3 to 6 month period.

Claims repudiation

Claim repudiation or rejection for individual policies declined marginally for both LIC and private players compared to last year. Private insurance firms repudiated 2.83% claims last fiscal down from 3.97% the year before.

Meanwhile LIC’s claim repudiation ratio fell to 0.43% in FY 2018-19 from 0.67% in FY 17-18.